CANADA FX DEBT-C$ weakens as oil falls and ahead of U.S. tax plan

Reuters Staff

3 Min Read

* Canadian dollar at C$1.3579, or 73.64 U.S. cents
* Bond prices higher across a flatter yield curve
* 10-year spread vs the U.S. hits widest since January 2016
By Fergal Smith
TORONTO, April 26 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Wednesday as oil prices fell and
investors turned attention to U.S. President Donald Trump's
promised announcement on tax cuts.
Oil prices fell ahead of data that will shed light on U.S.
crude inventories after an industry report indicated a surprise
rise in fuel stocks, underscoring the persistence of global
oversupply. Canada is a major exporter of oil.
U.S. crude prices were down 0.91 percent at $49.11 a
barrel.
The U.S. dollar climbed against a basket of major
currencies ahead of the tax overhaul announcement which could
help to revive investor interest in U.S. dollar investments
including the stock market after the initial post-election rally
began to fade in recent weeks.
In data published on Wednesday, Canadian retail sales were
down 0.6 percent in Feb, falling by more than economists'
forecasts for a decline of 0.1 percent, though January was
revised slightly higher to a gain of 2.3 percent from the
previously reported 2.2 percent.
The data does not alter the outlook for strong economic
growth in the first quarter, said Andrew Kelvin, senior rates
strategist at TD Securities. He expects gross domestic product
to rise around three percent annualized.
At 9:21 a.m. ET (1321 GMT), the Canadian dollar was
trading at C$1.3579 to the greenback, or 73.64 U.S. cents,
slightly weaker than Tuesday's close of C$1.3565, or 73.72 U.S.
cents.
The currency traded in a range of C$1.3558 to C$1.3609. It
touched on Tuesday its weakest in 14-months at C$1.3626.
Losses on Wednesday for the loonie came after the United
States said this week that it would impose preliminary
anti-subsidy duties averaging 20 percent on imports of Canadian
softwood lumber.
Still, lumber exports to the United States account for just
1.3 percent of Canada's total exports, said BMO Capital Markets,
in a research note. "The numbers show that the macro economic
impact on Canada should be limited."
Canadian government bond prices were higher across a flatter
yield curve, with the two-year up one Canadian cent
to yield 0.754 percent and the 10-year rising 16
Canadian cents to yield 1.505 percent.
The 10-year yield fell 2.4 basis points further below its
U.S. equivalent to a spread of -82.9 basis points, its widest
since January 2016.
(Reporting by Fergal Smith)